Gold might have dropped to a six-week low Tuesday, but Michael Dudas, precious metals and mining analyst at Sterne Agee, thinks the precious metal has plenty of gas left in the tank.
“As long as the Fed keeps real interest rates low, forever it seems, we think gold will continue to get bid,” he tells CNBC.
“So this pullback, from a fundamental basis, is more of a buying opportunity than a sell.”
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The Federal Reserve plans to keep interest rates at extraordinarily low levels until mid-2015. Fed easing is supportive for gold because it raises the threat of higher inflation.
December gold futures fell 1 percent Tuesday to settle at $1,709.40 an ounce on the Comex, after hitting the six-week nadir of $1,705.10 earlier in the day.
Dudas sees strong support for gold at $1,700, with demand coming from India, the country that purchases the most gold, and various central banks.
He has a price target of $2,000 for gold next year.
Dudas isn’t alone in his bullishness. Investors have been flocking to gold mutual funds and exchange-traded funds recently.
Legend Financial Advisors of Pittsburgh is putting some of its customers’ assets into First Eagle Gold I fund (FEGIX) and Van Eck International Investors Gold I fund (INIIX).
"We're using these positions in more aggressive strategies as a bet on mining stocks following the price of gold," Jim Holtzman, an adviser at the firm, tells The Wall Street Journal.
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